Co-operatives: Deputy Minister on Status of Support and Development; Committee Report on Wal-Mart /Massmart merger

Economic Development

20 February 2012
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Deputy Minister of Trade and Industry said that government had identified co-operatives as a means of job creation and alleviating poverty. Co-operatives had been transferred in 2001 from the Department of Agriculture to the Department of Trade and Industry (dti). The dti wanted co-operatives promoted in all sectors of the economy and had developed support interventions and a conducive environment through a National Co-operatives Development Policy, the Co-operatives Act of 2005, the Co-operatives Banks Act and the need to amend the current Co-operatives Act to establish the Co-operatives Development Agency and the Co-operatives Tribunal and an academy to train co-operatives. All tiers of government should promote co-operatives and it was a development priority for all levels of government. The United Nations had designated 2012 the International Year of Co-operatives. A campaign would be launched on the 12th of March for increased awareness of the role of co-operatives and to promote the seven principles of co-operatives. The celebrations would include hosting the International Co-operatives Alliance Board meeting in June in Cape Town and promoting the International Day of Co-operatives, in the first week of July, in the Northern Cape. There were 54000 co-operatives registered. The co-operatives unit in the dti was small and there was a need to re-look at the human resources allocated to it. The dti was trying to link co-operatives to market access and was assisting with creating access to local and international markets. Finance for co-operatives could be accessed via the South African Micro Finance Apex Fund (Samaf) for loans up to R10, 000 and the Co-operatives Investment Scheme (CIS) for loans up to R250, 000. The dti was giving support to co-operatives by assisting with registration, through awareness programs and publications and via the Small Enterprise Development Agency (Seda). At the provincial level, the Eastern Cape had established the Imvaba Fund while the Free State province had allocated R3million for co-operatives, Gauteng R1.6 million, Limpopo R4 million, North West R4.6 million and the Western Cape R1.3 million. In KwaZulu Natal (KZN), Ithala was giving active support to co-operatives. The Department of Labour had a co-operatives strategy in place while the Department of Public Works had allocated R20.8 million and the Department of Co-operative Government and Traditional Affairs had allocated R18 million.

The Deputy Director General: Empowerment and Enterprise Development in the dti said that the reason why the legislation was because none of the current enterprise development agencies were geared to assist co-operatives with the challenges they faced and because there had been changes in government administration in 2009. It wanted to develop the informal sector strategy parallel to the co-operatives strategy. In addition the dti was busy with a regional Industrial development strategy under which special economic zones (SEZ) would fall and it was seeking to resuscitate the old industrial parks of the former Bantustans in rural areas and to utilise this stagnant infrastructure.

The Chief Director: Co-Operatives in the dti, said the development of co-operatives had been identified as a viable means to create unemployment and in 2001 a new co-operatives mandate was transferred from the Department of Agriculture to the dti. It co-ordinated with provinces and municipalities on the development and promotion of co-operatives strategies and assisted with support and training. International Co-operatives Day was on the 7th of July. During the year there would be a schedule of activities which would be launched in the Northern Cape as it had the lowest number of co-operatives registered. The total number of registered co-operatives was 54, 461 as at December 2011. It had provided market access support at exhibitions in Italy, Portugal, Cameroon and India. The Co-operatives Incentive Scheme disbursement per sector showed that agriculture received 47%, clothing and textiles 19%, manufacturing 18% and services 12%. The total amount disbursed between April and December 2011 was R37.08 million.

Challenges included the fact that Treasury had ruled as unconstitutional the ten set aside programmes approved by Cabinet to help support the establishment of co-operatives. The support and coordination of co-operatives programs at provincial and municipal level was weak. Co-operatives had a very low survival rate. The program lacked an accurate reporting mechanism. It was intended to double the CIS investment to R100 million as the supply of funds was not in agreement with demand. Another challenge was to expand existing co-operatives and not just focus on start-ups. It wanted to assist in the support of co-operative marketing boards.

Members asked how many jobs had been created by the investment in co-operatives. What was co-operatives contribution to the GDP? What role did the National Youth Development Agency (NYDA) play? How were the other Departments supporting co-operatives? What were the survival rates of co-operatives? Was there a tool to measure the success of investment into co-operatives? Where did funding for the CIS come from? How did Seda operate in terms of co-operatives? Had any co-operatives developed to what would be regarded as an acceptable level? Were other departments also viewing co-operatives as important? What was the status of black ownership of co-operatives? What co-operatives model was South Africa following? What were the anticipated outcomes of the investment into co-operatives and how were the challenges such as weak co-ordination being addressed? How had land restitution or land ownership impacted on the establishment of co-operatives? What was the National Development Agency’s role in assisting co-operatives? Was funding given directly to co-operatives or through intermediaries? How aware were people of the co-operative’s products promoted by the dti? What niche areas had been identified in South Africa? How was double dipping of funds being dealt with? Did the dti have a dashboard on co-operatives to monitor progress? Members said the presentation was lacking a cost /benefit analysis to see how cost effective an investment it was in comparison to other programs seeking to promote job creation.

Wal-Mart /Massmart Report
The Committee Report on the Wal-Mart /Massmart merger was adopted.

 

Meeting report

Briefing
The Honourable Deputy Minister of Trade and Industry, Ms E Thabethe said that government had identified co-operatives as a means of job creation and alleviating poverty. Co-operatives had been transferred in 2001 from the Department of Agriculture to the Department of Trade and Industry (dti). The dti wanted co-operatives promoted in all sectors of the economy and had developed support interventions. The dti was trying to create a conducive environment through a National Co-operatives Development Policy, the Co-operatives ACT No.14 of 2005 and the need to amend the current Co-operatives Act to establish the Co-operatives Development Agency and the Co-operatives Tribunal and an academy to train co-operatives. All tiers of government should promote co-operatives and it was a development priority for all levels of government. The United Nations had designated 2012 the International Year of Co-operatives. A campaign would be launched on the 12th of March for increased awareness of the role of co-operatives and to promote the seven principles of co-operatives. The celebrations would include hosting the International Co-operatives Alliance Board meeting in June in Cape Town and promoting the International Day of Co-operatives, in the first week of July, in the Northern Cape. There were 54000 co-operatives registered. The co-operatives unit in the dti was small and there was a need to relook at the human resources allocated to it. The dti was trying to link co-operatives to market access and was assisting with creating access to local and international markets. Finance for co-operatives could be accessed via the South African Micro Finance Apex Fund (Samaf) for loans up to R10, 000 and the Co-operatives Investment Scheme (CIS) for loans up to R250, 000. The dti was giving support to co-operatives by assisting with registration, through awareness programs and publications and via the Small Enterprise Development Agency (Seda).

At the provincial level, the Eastern Cape had established the Imvaba Fund while the Free State province had allocated R3million for co-operatives, Gauteng R1.6 million, Limpopo R4 million, North West R4.6 million and the Western Cape R1.3 million. In KwaZulu Natal (KZN), Ithala was giving active support to co-operatives. The Department of Labour had a co-operatives strategy in place while the Department of Public Works had allocated R20.8 million and the Department of Co-operative Government and Traditional Affairs had allocated R18 million.

Mr Sipho Zikode, Deputy Director General: Empowerment and Enterprise Development in the dti, said that the reason why the legislation was being amended was that in 2005, Cabinet had approved an Enterprise Development Strategy which resulted in the establishment of Khula, Samaf and Seda but none were geared to assist co-operatives with the challenges they faced. He said the dti wanted to amend and update the Enterprise Development Strategy as there had been changes in government administration in 2009. It wanted to develop the informal sector strategy parallel to the co-operatives strategy. In addition the dti was busy with a regional Industrial development strategy under which special economic zones (SEZ) would fall. SEZ’s would be broader than Industrial Development Zone strategy, as a port of entry was required for the latter. It was also seeking to resuscitate the old industrial parks of the former Bantustans in rural areas and to utilise the stagnant infrastructure.

Mr Jeffery Ndumo, Chief Director: Co-Operatives in the dti, said the development of co-operatives had been identified as a viable means to create unemployment and in 2001 a new co-operatives mandate was transferred from the Department of Agriculture to the dti. It co-ordinated with provinces and municipalities on the development and promotion of co-operatives strategies and assisted with support and training. International Co-operatives Day was on the 7th of July. During the year there would be a schedule of activities (see slides 8-10 of the presentation). He said the Northern Cape had the lowest number of co-operatives registered. The total number of registered co-operatives was 54, 461 as at December 2011. It had provided market access support at exhibitions in Italy, Portugal, Cameroon, India and a BRICS meeting in China. It had assisted 175 co-operatives with registration and access to funding. The Co-operatives Incentive Scheme disbursement per sector showed that agriculture received 47%, clothing and textiles 19%, manufacturing 18% and services 12%. The total amount disbursed between April and December 2011 was R37.08 million. (For a provincial breakdown see slides 23-28 and for national departments see slides 29-31). He said Ithala in the KZN was the leading lender to co-operatives and that KZN had a 40% share of the national market.

Challenges included the fact that Treasury had ruled as unconstitutional the ten set aside programmes approved by Cabinet to help support the establishment of co-operatives. The support and coordination of co-operatives programs at provincial and municipal level was weak. Co-operatives had a very low survival rate. The program lacked an accurate reporting mechanism. It was intended to double the CIS investment to R100 million as the supply of funds was not in agreement with demand. Another challenge was to expand existing co-operatives and not just focus on start-ups. It wanted to assist in the support of co-operative marketing boards.

Discussion
Mr N Gcwabaza (ANC) asked how many jobs had been created by the investment in co-operatives. What was co-operatives contribution to the GDP? He said the youth were not represented in co-operatives as most owners were over 34 years old and what role did NYDA play. How were the other Departments supporting co-operatives?

Mr H Hoosen (ID) asked what the survival rates of co-operatives were. Was there a tool to measure the success of investment into co-operatives?

Ms D Tsotetsi (ANC) asked why there were no co-operatives in the Northern Cape.

Mr Z Ntuli (ANC) asked where funding for CIS came from? How did Seda operate in terms of co-operatives?

Mr X Mabasa (ANC) asked if any co-operatives had developed to what would be regarded as an acceptable level. Were other departments also viewing co-operatives as important?

Mr S Nongonyama (ANC) asked what the status of black ownership of co-operatives was. He was concerned that the spread of co-operatives in the Eastern Cape appeared to be near government offices and were less in the far flung areas and wondered whether this was because of convenience. He wanted to know what model South Africa was following.

Ms S Van der Merwe (ANC) wanted to know what the anticipated outcomes of the investment into co-operatives were and how were the challenges such as weak co-ordination being addressed.

Mr G Krumbock (DA) said the presentation was lacking a cost /benefit analysis to see how cost effective an investment it was in comparison to other programs seeking to promote job creation.

Mr K Mubu (DA) asked how land restitution or land ownership impacted on the establishment of co-operatives. What was the National Development Agency’s role in assisting co-operatives?

The Chairperson asked whether funding was directly to co-operatives or through intermediaries. How aware were people of the co-operative’s products promoted by the dti.

The Deputy Minister said the model wanted to decrease unemployment and to develop enterprises. Funding came via Samaf and the CIS and The Enterprise Organisation assisted with grants for amounts over R250000. An adjudication board sat to evaluate funding requests. She said Kenya had a very good model but that the model adopted needed to look at the whole value chain. She said KZN and Gauteng had good programs. The government had wanted ten products that government used every day to be supplied by co-operatives, however Treasury said it was unconstitutional. The budget allocation was not enough and it was not good to have good policy but no money to implement policy. Co-operatives needed to be looked at as business entities. In South Africa co-operatives should be seen as an intervention strategy at the beginning stages geared towards rural people. She said co-operatives should not be seen as a project but as a business entity.

Ms Zandile Ndaba, Senior Manager: Co-operatives at Seda said that it held awareness workshops throughout the value chain and it worked in partnership with the provinces and municipalities to leverage the funds.

Mr Ndumo said the 2008 survey on co-operatives answered all the questions raised but that the survey needed to be updated as it would indicate trends. He said co-operatives could not be seen as short term, it needed a medium to long term perspective. He said the last report showed a survival rate for co-operatives of 10%. There were more than 25 co-operatives doing very well. He said the model adopted was one of seeking to mobilise the social capital in communities. It was not a charity but a business. Co-operatives should not be judged by its size but on its ability to generate a surplus income, niche activities might even demand a small size. It had done international benchmarking taking into account India, Italy, Brazil, Bangla Desh, China, USA and Canada. He said medium to big co-operatives were mainly white owned and 90% of small co-operatives were black owned, 60% by women and 20% by youth. It had initially given funds directly to co-operatives but because of abuse of funds now required co-operatives to provide quotes and purchased capital equipment or stock on its behalf. Currently all agencies, the CIS and NEF with the cooperation of Seda and Khula co-operated so that if a project was greater than R250,000 it would add in a grant and support the enterprise. But it had not strengthened core funding from provincial donors and line departments; this was therefore a co-ordination challenge. It needed to know every department’s budget allocation to co-operatives. The amended Act will demand all spheres of government support co-operatives. For example Treasury had to support co-operatives, like the cps bank, in that sector.

The Deputy Minister said the land issue had impacted and this had been referred to local government. Funding for co-operatives was not given to buy land.

Mr Nongonyama asked what niche areas had been identified in South Africa, in the context of establishing what the priority co-operatives areas should be.

Ms Tsotetsi asked how double dipping on funds was being dealt with.

The Chairperson asked if the dti had a dashboard on co-operatives to monitor progress.

Mr Livhu Mukhiti, the head of the Deputy Minister’s office said the dti had developed close relations with the Department of Agriculture and Forestry to assist on land reform issues.

Mr Ndumo said the Department was in the process of establishing a dashboard in its IT system which would provide information from district to national department level. He said the Co-operatives Development Agency had been created precisely to avoid double dipping. This agency will look at all aspects including the provision of aftercare support to start-up co-operatives.

Mr Zikode said agriculture was the areas they wanted to focus on. It wanted 250 incubators developed by 2015 to assist co-operatives to become sustainable. He said lots of money was being pumped into big business and that if a cost benefit analysis had to be done on these investments into big business he was sure the returns would not be “rosy”.

The Deputy Minister said that it needed to be remembered that developing co-operatives was a medium to long term process of 30 to 40 years.

Wal-Mart /Massmart Report
The Committee Report on the Wal-Mart /Massmart merger was adopted.

The meeting was adjourned.




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